Cooperative Principles In Refinance

Saving members money through refinance challenges has become a trackable industry trend that grows loan portfolios.

In this economy, credit unions and their members seem to have some differing goals. Members want to save money, but credit unions want to lend more.

Many credit unions are envisioning ways to help both the institution and its members by saving members money through refinance challenges.

Ventura County Credit Union ($605.4M, Ventura, CA) has saved members $2.5 million in three months and is making substantial progress toward its $5 million goal by December. At the same time, the credit union has refinanced 711 loans, which Tina Estes, director of marketing at Ventura County, says is strong growth for the cooperative.

Our members are looking for smarter ways to borrow, says Estes. They may not be taking out more new loans, but trying to find ways to rework the loans they already have.

Seven Seventeen Credit Union’s ($816.3M, Warren, OH) goal was to save members $5 million as part of its Simplify and Save program. The credit union raised the goal from $1 million last year after hitting that goal in seven weeks. In five months, Seven Seventeen hit the $5 million mark, and has continued the program, saving members another $5 million in the next five months.

Simplify and Save not only targets refinancing as a way to save members money, but also focuses on financial education.

We’re building the teach a man how to fish’ philosophy into the program, says Eric Lanham, senior vice president of marketing at Seven Seventeen. Feedback has been exceedingly positive.

More than 1,200 members have experienced loan interest savings. Throughout the first five months of 2012, Seven Seventeen’s loans grew by $9.3 million compared to the same time last year. Its loan originations rose by 26.32% from March 2011 to March 2012, compared with the national average of 25%.

Both Ventura County and Seven Seventeen refinanced loans before its challenge, but Estes says the $5 Million Challenge helps member service representatives focus on refinance and broach the subject with consumers. Lanham says Ventura has had the same positive results.

The biggest incentive is just having a program where [employees] can very easily start a conversation with the members, Lanham says.

Getting staff onboard with the initiative is crucial. While Educators Credit Union ($1.4B, Racine, WI) rewards its employees individually, Ventura County gives group incentives. Ventura County gave the entire office doughnuts and bagels after reaching $1 million saved. When it reached $2 million, the every employee got a coffee or latte. Ventura gives the employees customized badges and ribbons depending on the amount of money they save members. Members are intrigued by the badges and ribbons and ask about the savings challenge, says Estes.

Seven Seventeen, Ventura County, and Educators are finding value in tracking the number of refinanced loans and the amount of money members saved. Ventura County will continue tracking the refi loans even after the challenge ends.

It’s a new way of doing business, says Jackie Benoun, vice president of lending at Ventura County. We need to be tracking the loans we steal from other financial institutions.

Tracking is a big part of Educators’ refinance challenges. Through its Fast Lane Financing program, Educators is working toward a $30 million goal in 2012. The cooperative financial institution, which has been participating in member savings challenges for four years, has already saved its members close to $28 million with more than half a year left in the challenge.

Credit unions are always working to improve the financial situation of members, therefore a program designed to help members save on their current debt just makes sense, says Linda Hoover, senior vice president of lending at Educators. The trend is just illustrating what credit unions are all about, people helping people.

And a credit union in Michigan, Michigan State University Federal Credit Union ($2.2B, East Lansing, MI), is also saving members money through refinancing, and it’s doing it quickly. The cooperative financial institution set a $1 million goal last year that staff hit within three months.

This year, the credit union hit the $1 million mark within two months and decided to make it a year-round promotion. During the second quarter of 2012, MSU did $3.4 million in loans that saved members $369,277. The credit union has saved its members $1.7 million so far this year.

MSU started the program after looking at its loan opportunities and noticing many members didn’t have specific loans with the institution.

We focused on refinancing loans from other institutions at a cost savings because we believed 90% of the time our rate would be better, says April Clobes, executive vice president and COO of MSU. Others are also doing this program to increase loans, better serve members, and help members save money with a better product and competitive rate.

Benoun said she believes helping members save members money is just the right thing to do. When the economy tanked, many individuals had trouble managing their finances. A member may have had poor credit a few years ago resulting in a higher interest rate loan, but Benoun says they should be able to get an improved interest rate now.

As a cooperative we’re here to help members in a tough time, Benoun says.

May 27, 2014

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